SHANGHAI - GlaxoSmithKline announced that the company has reached an agreement to acquire urology-dedicated Nanjing MeiRui in China for $70 million to expand its urology and over-the-counter presence in China's booming pharmaceutical market.

GSK will acquire 90 percent of the MeiRui shares from Pagoda Pharmaceuticals and the remaining 10 percent from Allergon AB. The company expects to close the transaction by the end of this year.

GSK declined to comment on the deal and noted the acquisition is subject to regulatory approval.

Under the agreement, GSK will have access to all of MeiRui's product portfolio, including its two leading products Prostat, a treatment for benign prostatic hyperplasia and chronic nonbacterial prostatitis, and SheNiTing (tolterodine) for treatment of overactive bladder.

MeiRui has another four products registered in China, including immunosuppressant mycophenolate mofetil, selective 5-alpha reductase inhibitor finasteride, antihypertensive naftopidil and antihistamine cetirizine, according to the online database of China's State FDA.

"Most big pharmas are looking to China for the next growth engine, and very quickly they realized how difficult it is to penetrate outside of large cities," a partner at a venture capital firm focusing on biotech investments in China told PharmAsia News.

Prostat, finasteride and naftopidil are all included in the new version of China's National Drug Reimbursement List as class B drugs, for which the reimbursement rate is decided at the provincial level.

A key new growth opportunity in China is expanding market share in tier 2 and tier 3 cities, Mark Reilly, GSK's general manager of Pharmaceuticals China & Hong Kong, said during the CLSA China Conference Dec. 1 in New York.

With the MeiRui acquisition, GSK may gain "access to channels" and increased China revenue, according to the venture capitalist, who wished to remain anonymous.

"Most of the country managers have independent P&L (profit and loss) responsibilities now," he noted.

Until now, GSK has not set up its urology team in China. Its benign prostate hyperplasia drug Avodart (dutasteride), which had a $243 million worldwide turnover during the third quarter has not entered the Chinese market. MeiRui's close relationship with local urologists could pave the way for the future launch of the drug in China.

MeiRui also helps run the China Urology Association, which gives them greater influence with urologists. In addition, MeiRui has been trying to take Prostat over the counter, which GSK's OTC division could facilitate (Also see "Market Rumors Grow On Potential GSK Purchase Of Nanjing MeiRui Pharma For Urology Expansion In China" - Scrip, 6 December, 2010.).

Tianjin Smith Kline & French Laboratories (TSKF), a joint venture OTC arm of GlaxoSmithKline in China, is the largest OTC company in China with its leading products Contac (pseudoephedrine) and Fenbid (ibuprofen).

However, the government's intent to protect local industry may create another barrier for foreign companies to acquire local leading players.

"The government will be open to some acquisitions, but tough on other more sensitive areas, such as vaccines. Overall, the willingness of MNCs to buy and the government's desire to protect the domestic pharma industry will eventually collide and deal pace will slow down," the venture capitalist said.

Last year, China's Ministry of Commerce wielded its new Anti-Monopoly Law to block Coca-Cola's purchase of a local juice producer and to impose severe restrictions on the combination of two other international businesses Also see "China's New Legal Power To Limit Or Block Mergers Could Signal Challenges Ahead For Global Pharmaceutical Alliances" - Scrip, 26 April, 2009.).

New Local Manufacturing Site

GSK will also gain another manufacturing facility from MeiRui, located at Nanjing, the capital of Jiangsu province.

GSK highlighted the importance of localized manufacturing for its 2020 plan, noting that local manufacturing will be a requirement for essential drugs, which are the key to China's rural market.

In China, GSK already has four manufacturing sites, which include two sites in Tianjin and Suzhou for pharmaceutical products, a vaccine site in Shanghai and an OTC manufacturing facility in Tianjin.

Last year, GSK brought up its fifth manufacturing site in China by investing $30 million to create a joint venture with local vaccine company Shenzhen Neptunus to manufacture and market flu vaccines in China (Also see "GSK Channels More Money Into Vaccine Venture With China's Neptunus As Earnings Sink In The West" - Scrip, 25 August, 2010.).

-Dai Jialing (j.dai@elsevier.com)

GSK Finalizes Acquisition Of Nanjing Meirui For $70 Million

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